The lines around healthcare are being redrawn - and all eyes are on pharmacy giant Walgreens to make the next move
- Healthcare companies are starting to look a lot different, through mergers and acquisitions that pair up different parts of the business.
- In the past few months, CVS Health has struck a deal with Aetna, while Cigna is acquiring pharmacy benefit manager Express Scripts in a $67 billion deal.
- Of the major healthcare companies, Walgreens has not gotten in on the action. Yet.
The nation's largest standalone pharmacy benefit manager, Express Scripts has struck a deal to be sold to Cigna.
The $67 billion deal is part of a movement that's blurring the lines of what constitutes a healthcare company. Instead of growing by acquiring other companies in the same business, companies have started to move into new lines of business.
Now, all eyes are on Walgreens.
The retail pharmacy giant has been on the sidelines as all of these new combinations have started to form, apart from some takeover talks between Walgreens and drug wholesaler AmerisourceBergen that have reportedly fizzled out.
"It kind of seems like the next move's theirs to make" said Michael Rea, the CEO of Rx Savings Solutions, which works with consumers and employers that are paying for healthcare understand their drug prices.
It's anyone's guess what strategy the company takes, but one thing is clear: The market Walgreens operates within is changing, and it'll need to do something to keep up.
Analysts at Mizuho Bank speculated they're taking a "wait and see approach" but hoped that it wouldn't last. "Hopefully the company does not wait too long to make a strategic move given the changing competitive dynamics."
In the past few years, healthcare companies have started incorporating a lot more businesses all under one roof. Traditionally, if you think about the pharmaceutical supply chain, there were the drug companies, drug wholesalers, pharmacies, PBMs, and health insurers responsible for paying for a certain medication alongside the patient. But with deals like CVS Health's acquisition of Aetna, some companies have started to oversee as many as three pieces of that chain, giving those companies more control over the spending that's going on in healthcare.
Overall, the trend of acquiring more businesses within healthcare to get more vertical isn't going anywhere.
"We're going to see a lot more vertical integration happening," Gurpreet Singh, partner and US health services leader at PwC told Business Insider. "And it's not just in the payor space." Deals like the one between Roche and cancer technology company Flatiron Health suggest there's room for diagnostics and drug companies to get into the vertical spirit as well.
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